Economists: Glass half-full

WASHINGTON — In a hopeful sign for the economy, the number of newly laid-off workers filing claims for unemployment benefits fell below 500,000 last week for the first time since January.

THE ASSOCIATED PRESS

WASHINGTON — In a hopeful sign for the economy, the number of newly laid-off workers filing claims for unemployment benefits fell below 500,000 last week for the first time since January.

Consumer spending also picked up in October, and new-home sales hit their highest point in more than a year. Combined, the news suggested that the economy should be able to sustain at least a modest rebound. Some economists have worried that the economy was at risk of slipping back into recession.

The number of people filing first-time claims for jobless aid fell by 35,000 to 466,000, the Labor Department said yesterday. That was the fewest since September of last year. And it was far better than the 500,000 economists had expected.

Still, analysts noted that jobless claims would have to drop to near 400,000 for several weeks to signal actual growth in employment.

Economists estimate the economy will lose a net 145,000 jobs this month. It would have to add 125,000 jobs a month just to keep the unemployment rate from rising.

Some economists sounded cautionary notes about yesterday's positive news. They say the sluggish recovery could limit further improvements in jobless claims, new-home sales and consumer spending, which powers 70 percent of the economy.

"When taken all together, the reports still paint a picture of a slow economic recovery," said Mark Vitner, an economist at Wells Fargo.

One such sign was that orders for costly manufactured goods fell unexpectedly last month. Much of October's weakness came from a big drop for goods related to defense. Excluding those, orders for other types of manufactured goods rose slightly. Still, the overall performance was weaker than economists had expected.

Some analysts also cautioned against reading too much into the sharp drop in unemployment claims. They noted that part of the improvement reflected large seasonal adjustment factors, which smooth out changes that normally occur at certain times of the year. Excluding seasonal adjustments, claims rose. That's normal at this time of year when many construction workers face layoffs because of worsening weather conditions.

Most economists say the recovery will remain so weak and job creation so slight that the unemployment rate will keep rising. Many think the rate, which hit a 26-year high of 10.2 percent in October, could top 10.5 percent by mid-2010. Federal Reserve policymakers expressed concern at their November meeting that the rate could remain elevated for several years, according to minutes of the discussions released yesterday.

Analysts also noted that the surge in new-home sales was driven entirely by a 23 percent increase in the South. Sales in all other regions fell.

Still, taken together, the reports on jobless claims, consumer spending and home sales were encouraging, and stock prices rose in light volume on Wall Street.

New jobless claims dropped below 500,000 for the first time since the first week in January. Weekly claims peaked at 674,000 in March and have since been trending lower.

Consumer spending rose a 0.7 percent last month, following 0.6 percent drop in September, the Commerce Department said. It was the best showing since a "Cash for Clunkers" 1.3 percent jump in August.